The EU emission trade system should be strengthened by including additional sectors to achieve greenhouse gas reduction targets

Monopolies Commission calls for adjustments with respect to the awarding of concessions for network operation to relieve consumers

The energy turnaround (“Energiewende”) is a major challenge for the entire energy system in Germany, and requires targeted action. In its Special Report “Energy 2017: Avoid patchwork, targeted action required”, which has been published today, the Monopolies Commission draws up proposals for the Federal Government from where to start. “We currently see few concentration problems in energy markets. However, the adjustment of the regulatory framework in the course of the energy turnaround represents a major challenge. A consistent regulatory framework may contribute to limit the costs of the energy turnaround, says the chair of the Monopolies Commission, Prof. Achim Wambach.

The market share of the four largest energy suppliers has decreased again compared to the year 2014. In the year 2016, it accounted for 54 percent (2014: 62 percent). Other market power indices, calculated regularly by the Monopolies Commission, such as the Residual Supply Index (RSI), likewise do not indicate any problems with market power in electricity wholesale.

One main focus of the Special Report “Energy 2017” is the implementation of the energy turnaround in Germany. The primary objective, reducing greenhouse gas emissions, should be attained by reinforcing the EU emission trade system (EU ETS). For this purpose, additional sectors, e.g. the transport sector, should be included in the system. A well-functioning, cross-sectoral EU ETS would allow to phase out the subsidy system for renewable energies and facilitate the coupling of sectors (“Sektorkopplung”), viz. the use of renewable energy resources in the sectors concerned. The funding of renewable energy plants (e.g. wind parks and solar modules), and the extension of grids due to the energy turnaround entail costs that increasingly burden the electricity consumers in Germany. The Monopolies Commission proposes measures which could limit this burden. Using technology-neutral auctions to determine subsidy levels for renewable energies allows for an inexpensive installation of renewable energy plants. Moreover, the introduction of regionally differentiated network charges for renewable energy generators (“EE-Regionalkomponente”) would provide incentives for plant operators to account for possible network expansion costs in their choice of location. This would limit network expansion requirements and the network charges imposed on electricity consumers.

Municipalities are obliged to tender the operation of electricity and gas distribution networks in their territory. The Monopolies Commission has identified deficiencies in the tendering procedure, which frequently have the result that awards go to other applicants than the most cost-efficient ones. Municipalities should therefore also foster competition by means of a discount to expected network charges (“Netzdividende”), which would ensure that the award goes to the applicant operating the network most efficiently. This would open options for electricity consumers to benefit from reduced network charges.